Appeal for Loan Interest to Be Withheld – A Case Study
Tunde Raji - March 12, 2018

As the then Chief Finance Officer / Head of Operations / Head of Risks of Wesley Microfinance Bank Ltd, a unit microfinance bank wholly owned by the Methodist Church of Nigeria. I received a minute internal memo from the Managing Director to treat accordingly a letter titled: “Appeal for Loan Interest to be withheld”. What really prompt me to share this is just to rub minds as this act is often practiced in microfinance institutions by the management. Is it really favorable?


The purpose of this write-up is to address a case study of withholding loan interest of defaulted loan customers. It also aimed at receiving opinionated views of microfinance professional colleagues on the subject matter in terms of the associated financial implications.


It was stated in the internal memo that a customer (name withheld) took a loan of five hundred thousand naira (N500,000.00) from our bank to be repaid for the period of six months. The loan was granted on November 6th, 2014 and as at reporting date of July 22nd, 2015 she only made a repayment of about twenty percent (20%) of the principal loan sum only. Her outstanding loan repayment balance (Principal +Interest) as at reporting date has Skyrocketed to about One hundred and thirty-one percent (131%) cummulatively.


Moreover, it was reported in the internal memo that the customer could not be located and all efforts to find her have proved abortive. The two guarantors were not forthcoming. Based on this, the relationship officer was appealing for the interest on the loan to be stopped.


In conclusion, this scenario is multi-dimensional which could be looked at from the employee, management, stakeholder, and customer’s point of view. As the host, I reserve my contributions and comment. Air your own view through comment.

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